Treasurer Bill Lockyer joined Sacramento County and 18 other municipal bond issuers Friday to lobby federal lawmakers and the Federal Reserve to shore up battered municipal bond markets.
Lockyer, Sacramento County chief operations officer Nav Gill and 18 other top state and local officials argued that weak demand for variable rate bonds is crippling already tight local and state finances by forcing issuers to pay higher interest rates on bonds and related costs.
The group wants the Federal Reserve to pump cash into short-term bond markets. They said the plea for financial help was not a bid for a bailout or subsidy.
The request was contained in a five-page letter to some of Washington's most powerful lawmakers, including House Speaker Nancy Pelosi, California Sens. Dianne Feinstein and Barbara Boxer, and Rep. Barney Frank, a Massachusetts Democrat who chairs the House Financial Services Committee.
"These problems are burdening taxpayers with substantial costs, worsening state and local governments' budget woes, further destabilizing our banking and financial system, and hindering financing of infrastructure projects needed to help put us on the road to economic recovery," the letter states.
Spokesmen for Boxer and the Federal Reserve had no immediate comment.
The group said that banks have historically bought and sold variable rate short-term bonds to keep markets healthy for issuers and investors. Now, banks are either unable or unwilling to purchase the bonds, and investors are dumping them amid fears that buyers will vanish when they do need to sell.
Lockyer's group argues that the Fed should buy bonds that investors have dumped or lend banks money so they can use it to buy bonds and stabilize markets.
They acknowledge that private banks and investors would all benefit from such action, but insisted its request was "neither a bank bailout nor a municipal subsidy."
Citizens also would benefit. "This will help taxpayers by keeping down the cost of the municipal debt they support," the group letter states.
Call The Bee's Andrew McIntosh, (916) 321-1215.
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